New York (HedgeCo.Net) – Citigroup has agreed to pay approximately $7 billion for its part in the financial crisis of 2008, the WSJ reports. Citigroup is accused of downplaying the risks of sub-prime mortgages when packaging them selling them to hedge funds, mutual funds and pension funds.
“The penalty is appropriate given the strength of the evidence of the wrongdoing committed by Citi,” Attorney General Eric Holder said, “The bank’s misconduct was egregious. As a result of their assurances that toxic financial products were sound, Citigroup was able to expand its market share and increase profits.”
The Department of Justice initially asked for $12 billion, while Citigroup placed its opening bid at $363 million. The end result consists of fines of $4 billion in cash to the DoJ, $2.5 billion in consumer relief, more than $200 million to the FDIC and just under $300 million to settle probes by five states.
“We believe that this settlement is in the best interests of our shareholders, and allows us to move forward and to focus on the future, not the past.” Citi CEO Michael Corbat said.
The consumer relief will be in the form of financing provided for the construction and preservation of affordable multifamily rental housing, principal reduction and forbearance for residential loans, as well as other direct consumer benefits from various relief programs. Citigroup has agreed to provide the consumer relief by the end of 2018.
Citigroup today reported second quarter earnings per share of $0.03; $1.24, a net income of $181 million; $3.9 billion, and revenues of $19.3 billion, excluding the impact of the mortgage settlement.
Alex Akesson
For HedgeCo.net
alex@hedgeco.net
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